World Oil ReservesThe world has proven reserves equivalent to 46.6 times its annual consumption levels. This means it has about 47 years of oil left (at current consumption levels and excluding unproven reserves).
The EIA forecast that Brent crude oil prices will average $72/b in the second half of 2021 and $66/b in 2022. Prices are increasing due to higher demand as more people are vaccinated against COVID-19. OPEC is gradually increasing oil production after limiting it due to a decreased demand for oil during the pandemic.
The Organization for Petroleum Exporting Countries reports that there are 1.5 trillion barrels of crude oil reserves left in the world. These are proven reserves that are still capable of being extracted by commercial drilling.
According to market research by IBISWorld, a leading business intelligence firm, the total revenues for the oil and gas drilling sector came to approximately $2.1 trillion in 2021.
Of the 13 members of the Organization of the Petroleum Exporting Countries (OPEC) as of January 1, 2021, five of them were Persian Gulf countries: Iran, Iraq, Kuwait, Saudi Arabia, and the United Arab Emirates.
Both AET-2 and IEA NZE predict oil prices much lower than today's – but AET-2 is materially lower in 2050. In AET-2, OPEC gains market share from 37% today to over 50% in 2050 (which IEA NZE concurs with) but loses its market power, with oil demand falling by 2 million b/d every year.
According to a new paper by two researchers at the University of California – Davis, it would take 131 years for replacement of gasoline and diesel given the current pace of research and development; however, world's oil could run dry almost a century before that.
Paul Sankey, Sankey Research analyst, on how to trade the energy space.
The world economy remains much more dependent on oil than most of us imagine. Oil remains the world's primary energy source, even if the global economy is admittedly less dependent on oil than it used to be. Will the world economy be able to escape the grip of oil in the near future? The short answer is no.
The benefits of investing in oil and gas stocks are that they can produce significant capital gains from share price appreciation and attractive dividend income during periods of high oil and gas prices. As crude oil prices rise, oil companies tend to generate increasing cash flows.
What countries are the top producers and consumers of oil?
| Country | Million barrels per day | Share of world total |
|---|
| United States | 18.60 | 20% |
| Saudi Arabia | 10.82 | 11% |
| Russia | 10.50 | 11% |
| Canada | 5.26 | 6% |
The oil industry was already struggling before the pandemic struck, with a weakened global economy decreasing demand for energy and producers flooding the market with cheap fuel. As the pandemic gripped the U.S. economy and demand for fuel plummeted, Exxon announced in March that it would cut expenses by 30%.
In order to project how much time we have left before the world runs out of oil, gas, and coal, one method is measuring the R/P ratios — that is the ratio of reserves to current rates of production. At the current rates of production, oil will run out in 53 years, natural gas in 54, and coal in 110.
The production, distribution, refining, and retailing of petroleum taken as a whole represents the world's largest industry in terms of dollar value.
Bottom line: Exxon stock is not a buy and has entered sell range.
How to Invest in Oil
- Invest in an energy-focused ETF or Mutual Fund. Exchange-traded funds (ETFs) and mutual funds allow you to buy a basket of investments in one purchase.
- Trade Oil Options and Futures.
- Invest in MLPs.
- Buy Stock in an Oil and Gas Company.
It's generally better to buy oil stocks when oil prices are low and expected to rise rather than when they are already high. However, the price of oil affects different types of oil stocks in different ways.
Best Oil Stocks That Pay Dividends
- Helmerich & Payne, Inc. (NYSE: HP)
- Royal Dutch Shell plc (NYSE: RDS-B) Number of Hedge Fund Holders: 36 Dividend Yield: 3.6%
- Canadian Natural Resources Limited (NYSE: CNQ) Number of Hedge Fund Holders: 29 Dividend Yield: 4.57%
- BP p.l.c. (NYSE: BP)
- Chevron Corporation (NYSE: CVX)
Best Oil Stocks to Buy Amid Post-COVID Demand Boom and Price Volatility
- Dorian LPG Ltd. (NYSE: LPG)
- Pioneer Natural Resources Company (NYSE: PXD)
- Devon Energy Corporation (NYSE: DVN)
- CNX Resources Corporation (NYSE: CNX)
- ConocoPhillips (NYSE: COP)
Top Oil ETFs by AUM
- Vanguard Energy ETF (VDE) Symbol.
- VanEck Vectors Oil Services ETF (OIH) Symbol.
- United States Oil Fund (USO)
- iShares U.S. Oil & Gas Exploration & Production ETF (IEO)
- SPDR S&P Oil & Gas Equipment & Services ETF (XES)
- ProShares Ultra Bloomberg Crude Oil (UCO)
- Invesco S&P SmallCap Energy ETF (PSCE)
Commodities are priced in US dollars (even the Europeans buy a barrel of oil in US dollars). So, WHEN THE US DOLLAR GOES UP IN PRICE, THEN COMMODITIES GO DOWN IN PRICE (all other things being equal). A barrel of oil costs $43.00. For the American, the cost is straight-forward: it's $43.00.
Yes, it is time to buy oilIn October 2020, the International Energy Agency (IEA) stated that growth in oil demand is likely to end by 2030 and then flatline. So sticking with large, financially strong oil companies with diversified businesses is probably the best call for most investors.
Demand-supply equationWith crude oil prices crashing, supplies were reduced in the second quarter, by both OPEC and non-OPEC producers. The sharp rally in petroleum price in 2021 is due to two primary factors. According to the IEA, oil output from non-OPEC plus countries is set to rise by 710 kb/d in 2021.
Most oil analysts don't expect a return to 2019 demand levels until 2022. A rise in oil prices to $100 a barrel isn't very likely anytime soon, analysts say, but traders are still placing bets on a price spike of as much as 30% by the end of 2022.
Crude oil prices are determined by global supply and demand. Economic growth is one of the biggest factors affecting petroleum product—and therefore crude oil—demand. Growing economies increase demand for energy in general and especially for transporting goods and materials from producers to consumers.
The analysts, including John Freeman and Pavel Molchanov, estimated in a report that West Texas Intermediate (WTI) crude prices – the United States benchmark — would start 2022 at $80/bbl and average $75 over the course of next year. This is freeing people to travel and propelling demand for fuels derived from oil.
Crude oil extended gains on Wednesday, almost touching $75 a barrel on rising global demand. This persistent uptrend over the past two months has pushed domestic petrol and diesel prices to record levels. Demand recovery in the US, Europe and Asia driving up prices.
